Leading indicators signal promising US economy in 2018
TIER business composite indicators mount up simultaneously

The Taiwanese Economy in January 2018

The leading indicator recently issued by the US conference Board
went up significantly. In addition, the manufacturing and non-manufacturing
PMIs issued by the Institute for Supply Management both stood way
beyond the point of 50. The implications would have two folds: the
US recovery continues, and the US economic expansion lasts. It is
obvious that the US will shoulder the world economy at least in
the short run. As the market demand driven by the US is strong,
all three composite indicators issued by the Taiwan Institute of
Economic Research (TIER) mount up at the same time.
Taiwan's exports in January 2018 increased significantly by only
15.33% compared with the same month of 2017 that would also be the
16th month of positive growth in exports. Regarding imports, Taiwan's
imports in January 2018 increased by 23.30% compared with imports
in January 2017. Taiwan's exports and imports in January 2018 gave
a trade surplus of US$ 2.42 billion or a decrease by 30.80% on a
year-on-year basis.
Taiwan's consumer price index (CPI) went up by only 0.88% in January
2018 compared with the same month of previous year. The core inflation
rate stood at 0.82% in January 2018. In addition, the wholesale
price index (WPI) moved down by 0.74% in January 2018 on the year-on-year
basis. In a nutshell, the current inflation is relatively mild.
As for exchange rate, the NTD went stronger due to the relatively
weaker USD, despite the Fed has decided to conduct tightening measures
by schedule. Nonetheless, the NTD/USD stood at 29.15 in late January
2018 indicating a 2.34% appreciation. Regarding the interest rate,
it remained low and steady in January 2018 due to the continued
loose monetary operations by the CBC with respect to the most recent
CPI reading and relatively strong NTD; the lowest and highest over-night
call rate in January 2018 stood at 0.175% and 0.186% respectively.

Business Outlook

The portion of manufacturing firms who perceived business were
better than expected in the target month was 28.9% or increased
by 2.4 percentage points compared with respondents who perceiving
better business in the previous month. The portion of those perceived
business were getting worse in the target month was 16.3% or decreased
by 13.8 percentage points than 30.1% perceiving worse business of
the previous month. The portion of manufacturing firms who perceived
business remained constant in the target month was 54.8% or increased
by 11.5 percentage points compared with 43.3% perceiving constant
business in the previous month. Overall, manufacturing firms perceived
the business in the target month was rather neutral.
In addition, the portion of manufacturers who perceived business
would be better in the next six months was 34.4% in the target month
or increased by 9.6 percentage points than 24.8% feeling more optimistic
about the future in the previous month. The portion of firms who
perceived the economic outlook would be worsening was 11.8% or decreased
by 6.9 percentage points compared with 18.7% feeling rather pessimistic
about the future in the previous month. The portion of manufacturing
firms who perceived business remained constant in the next six months
stood at 53.8% or decreased by 2.7 percentage points compared with
56.5% feeling neutral about the business outlook one month earlier.
Overall, manufacturing firms perceived the business in the near
future was also somewhat more optimistic.
The manufacturing composite indicator for January, 2018 adjusted
for seasonal factors on moving average, saw an upward correction,
and from a revision of as 98.81 points in December 2017 moved up
to 100 points in January 2018. Figure 1 shows an increase of 1.19
points.
The TIER service sector composite indicator for January 2018 adjusted
for seasonal factors on moving average, saw an upward correlation,
and from a revision of as 91.67 points in December 2017 moved up
to 93.05 points in January 2018 that would also be the second consecutive
increase. Figure 1 shows an increase of 1.38 points.
In addition, the TIER Construction Sector Composite Indicator for
January 2018 adjusted for seasonal factors on moving average also
saw an upward correction, and from a revision of 104 points in December
2017 went up to 104.39 points in January 2018. Figure 1 shows an
increase of 1.39 points, the third month of consecutive increase.

Forecast on Individual Industries

Following are manufacturers' sentiments that are industry-specific
in the monthly TIER surveys:

● Manufacturers' sentiments that have been in decline in the January
survey and are expected to deteriorate over the next six months
include:
Plastic Products Manufacturing, Restaurants and hotels.

● Manufacturers' sentiments that have been in decline in the January
survey, but are expected to improve over the next six months include:
Printing, Non-metallic Mineral Products Manufacturing, Cement and
Cement Products Manufacturing.

● Manufacturers' sentiments that have been in decline in the January
survey and are expected to remain sluggish over the next six months
include:
Porcelain and Ceramic Products Manufacturing, Audio and Video Electronic
Products Manufacturing, Basic civil structure construction, Telecommunication
services.

● Manufacturers surveyed who felt the January outlook was the same
as the previous month, but the outlook is expected to exacerbate
over the next six months include:
Data Storage Media Units Manufacturing and Reproducing.

● Manufacturers surveyed who felt the January outlook was the same
as the previous month, but the outlook is expected to improve over
the next six months include:
Electrical Machinery, Electrical Machinery, Supplies Manufacturing
and Repairing, Electronic Machinery, Communications Equipment and
Apparatus Manufacturing, Electronic Parts and Components Manufacturing,
Precision Instruments Manufacturing.

● Manufacturers' sentiments that have improved in the January survey
and is expected to deteriorate over the next six months include:
Prepared Animal Feeds Manufacturing.

● Manufacturers' sentiments that have improved in the January survey
and is expected to remain upbeat over the next six months include:
Paper Manufacturing, Machinery and Equipment Manufacturing and Repairing,
Cutlery and tools Manufacturing, Industrial Machinery, Electrical
Appliances and Housewares Manufacturing, Education and Entertainment
Articles Manufacturing, Construction, Banks.